Issues And Features Of The Audit Process Term Paper

Issues And Features Of The Audit Process - Term Paper Example Independent auditing is encouraged in organizations in order to protect the potential investors and shareholders from any misrepresentation of the financial statement or fraudulent claims that are often made in the public companies (Gray and Manson, 2008: 98). Moreover, after the Sarbanes-Oxley Act (SOX) introduced in 2002, the appointment of the independent auditor becomes mandatory for improving the auditing and accounting procedure. Many organizations are seen to appoint independent auditors, who are certified public accountants, responsible for checking their business transactions and financial records, yet not being affiliated with it (Singleton, T.W., and Singleton, A.J., 2010: 13). However, independent auditing is seen to suffer from a large number of threats such as intimidation threat, trust or familiarity threat, advocacy threat, management threat, self-review threat and self-interest threat. Therefore, safeguarding the independence of the auditors becomes a major area of c oncern. This report focuses on the safeguards for the independence of auditors. Safeguards to save the Independence of the Auditors On recognizing the significant threat of independence in the auditing process, the organization must decide on some safeguards in order to save the auditors. Some of the approaches that are considered by organizations are as follows: Mandatory rotation in the auditor: In a case where an external auditor is serving a particular client for many years, they often end up building relationships with their clients, which make them less skeptical about their work than that they would have been otherwise. The SOX Act has made it mandatory for the public company, who is the partner-in-charge, to rotate their auditors, at least every five years. However, for non-public companies, there are no such requirements for rotation of auditors.